Here is another example of one of my portfolio companies’ mantras: Google giveth and Google taketh away (see my post from April for more on this). Who knows the real reason why Google shut off Adsense for Incredimail (Nasdaq: MAIL) but look at what happened to the stock in one day—a 40% drop. I am not saying that startups should not use Adsense but this just reminds that one should always take a hard look at their business and if they are too heavily dependent on any one customer or partner, they should think long and hard about how to diversify their business. Any good company will ride the gravy train as long as they can while preparing themselves for the day the ride will be over. As I have said before, there is nothing wrong with free distribution or easy revenue but at some point in time, startups need to figure out how to control their own destiny.
And while we would all love to build our business off the back’s of other brands and distribution, at the end of the day, in order to create a big winner, it is imperative for startups to control their own destiny. This means that your business has to be able to grow organically and not have its fate FULLY dependent on its partners.
Anyway, Michael Eisenberg also has a nice take on this subject over at Seeking Alpha.